Gold futures notched a modest gain on Monday, after a drop late last week that took the commodity to the lowest close of 2018, as trade tensions elevated global uncertainty, providing support for bullion prices.

Global markets have focused on a growing trade spat between the U.S. and China. The hostilities have shown signs of devolving into a full-blown trade war, raising questions about the outlook for economic global growth if the two largest economies, China and the U.S., lock horns.

“Traders are in a risk-averse mood to start the trading week,” said Jim Wyckoff, senior analyst at Kitco.com, in a note. “World trade war worries continue to be on the front burner of the marketplace, as the world’s two largest economies — the U.S. and China — square off.”

“Unfortunately for the gold market bulls, their yellow metal last Friday wanted to act like a raw commodity instead of a safe-haven store of value,” he said. “Still, the trade tensions world-wide could support the gold market if the situation deteriorates further.”

The drop Friday in gold prices came as the U.S. dollar marked a 1.3% weekly gain, following a series of central-bank gatherings. A key move was the European Central Bank’s policy decision on Thursday to eventually unwind its crisis-era, easy-money programs but hold its benchmark rates at lower levels for a longer period than the market had expected. That resulted in a tumble for the euro
EURUSD, +0.0176%
against the buck.

The ICE U.S. Dollar Index
DXY, +0.38%
a measure of the dollar against a half-dozen major currencies, was up by less than 0.1% at 94.84, holding near 2018 highs.

“Last week’s dollar strength broke the [gold] bull’s back, hip and wrists, with a significant decline on Friday…” wrote Rick Bensignor, president at Bensignor Strategies, in a Monday research note.

Bensignor said that after gold flirted with prices around $1,350 without breaking out, it implied that the metal might struggle and could be vulnerable to a “catalyst.” That now leaves gold with a drop to around $1,250 or $1,235 possible, he said.

Elsewhere in metals trading, July silver
US:SIN8
settled down 0.2% at $16.44 an ounce, after registering a 1.6% weekly decline on Friday.

July copper
US:HGN8
fell 1.2% to $3.107 a pound. July platinum
US:PLN8
edged down by 0.4% to $883.90 an ounce, while September palladium
PAU8, +1.02%
ended at $982.90 an ounce, up 0.1%.

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